Exclusive! Somerset Council extended Southwest One contract after dispute started

The dispute between the Southwest One (SWo) joint venture and Somerset County Council (SCC) seems to be escalating. You may remember that SWo – in which IBM own 70% of the equity and 15% SCC own 15% - is taking SCC to court, claiming that SWo is owed payments as gain share on procurement savings they’ve made through the back-office outsourcing JV. Yes, you heard right – Somerset is “suing itself”.

But SCC dispute the SWo claims. Now recent Council minutes show that matters are getting more tense.

“Over the past 3 weeks SWo have commenced Disputes on several other matters, issuing further financial claims and disputing SCC’s warning notices”.

Meanwhile, campaigner for the truth Dave Orr has discovered more fascinating information.

On February 15th this year, Ken Maddocks, the Council Leader, made a statement to the full council meeting, sounding off about how badly the JV was going. Computer Weekly reported:

He said SW1 had made "staggering losses" and yet delivered little of the savings it had originally promised for councils who joined the venture.

But incredibly, Orr has discovered that on March 6th, the three public sector parties involved in the JV (SCC, Taunton Deane Council and Somerset Police) wrote to SWo to confirm that they wanted to extend the original four year contract framework (see clarification in Dave Orr's "comments" below) by two years!

Now that was within the scope of the original OJEU advert and contract, but contractually they should have given six months’ notice of their intention to extend. So they had to ask SW1 formally to waive that requirement, as notice should have been given by September 17th 2011, 6 months before the termination date of March 17th.

Clearly, it was in the supplier’s interest to accept the extension, and Southwest One duly did that.

But of course this raises some interesting questions.

For a contract that was apparently going badly wrong, with a supplier losing money and high levels of customer dis-satisfaction, was serious consideration given to not extending?

Were Maddocks’ comments part of negotiation positioning? If so, did Somerset get any concessions out of SW1 in return for the contract extension?

At what level was the decision to extend taken? The extension letter was signed for the Council by Donna Fitzgerald, “Senior Responsible Officer” for the contract, but she is not on the list of the Council’s top execs – was she really the decision maker, or just the signatory?

Perhaps surprisingly, Councillors do not appear to have been involved in any discussion around the extension, according to information provided to Dave Orr. Was this sensible or proper?

So what on earth was going on in SCC? Given that my experience over the years suggests that “cock-up” as explanation usually trumps the “conspiracy” theories, did someone say in February,

“Oh damn, the SWo contract expires next month – it’s far too late to do anything different, we better just extend. And we haven’t really got time to tell the councillors....”.

Anyone who has been around major contracts for a while knows that sometimes pragmatic decisions have to be made, even when a relationship with a supplier isn’t great. But it seems surprising to say the least if elected councillors weren’t even informed about a decision that committed the council to further tens of millions being spent with a supplier where relationships were clearly so poor. Remember, this is a supplier who just 6 months later decided to take the council to court.

And that’s another point of course. We don’t want to say anything here to prejudice future court discussion, but to have had an apparent endorsement like this from the Council .. well, it doesn’t exactly help the SCC case.

Voices (4)

Dave Orr:
22.11.2012 at 7:52 am

Errata: “The direct contract runs for 10 years and is 5 years old now. Somerset County publicly said) of cost to disengage” should read:

“The direct contract runs for 10 years and is 5 years old now. Somerset County Council (SCC) declined to take up the 5 year break-point this year for reasons (they publicly stated) of the cost to disengage.”

It was the Framework Agreement that was extended by two years (from 4 years to 6 years from the original contract signing date).

The direct contract runs for 10 years and is 5 years old now. Somerset County publicly said) of cost to disengage.

Under the original EU tender notice (that led to contract with IBM for SW1), this allows a list of pre-declared Councils, Police services & other public authorities who signed up, to take up SW1 services without having to go through an EU tender.

Peter is spot on when he states that this action is essentially one of approval & reference and will sit very oddly with an on-going legal dispute.

You have to admire IBM./SW1’s audacity in suing their own founder & lead partner SCC, having fallen massively short on so called “assured savings” of £200m and delivered a “poorly configured” SAP ERP (configured by IBM India – IGSI).

SCC declared that a middle-ranking SRO took this decision alone on a formal Freedom of Information request.

I have now written to the Leader of SCC, as a decision of this magnitude is a “key decision” and should have involved the Leader or Cabinet or Senior Councillor or a delegated Senior Officer.

Q1. Did SCC seek any legal advice (internally or externally) before
waiving this part of the original Framework Agreement? If legal
advice was sought then please disclose that advice.

Q2. Did the County Solicitor/Monitoring Officer approve of the
waiver and extension of the original Framework Agreement?

The signing SRO for SCC is not, to my recent knowledge, a Director
or a Head of Service.

Q3. Did the signing SRO for SCC seek any approval from a more
Senior Officer? If so with whom & on what date please?

Q4. Did the signing SRO for SCC discuss (in any medium – meeting,
call, email etc) this matter with any elected Councillor (formally
or informally)? If so with whom & on what date please?

Q5. The Framework Agreement was extended on the 19th March 2012. On that date, was the Council in any form of informal or formal
escalation or dispute procedure with SW1 (or IBM)? If so, please
provide details.

There might also be an option 2 – the exit provisions in the contract are inadequate and SCC simply have no idea how they are going to bring all those services back in-house. They extended the contract in order to give them time to figure it out.

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